Huge Dairy Doesn’t Fit Organic Image

PLATTEVILLE, CO – Not far from the truck stops that mark the I-25 turnoff to Longmont, Colorado’s largest organic dairy spreads across 500 acres.

Some of the farm’s 1,075 black-and- white Holsteins amble across a pasture while others in open-air paddocks chew on a moist mixture that includes alfalfa hay, soy hulls and mineral supplements. Throughout the day, semi- trucks shuttle into a state-of-the-art plant where the milk is pasteurized, packaged and prepared to be sent to Wal-Marts and other supermarkets across the country.

Aurora Organic Dairy’s sprawling Platteville farm – one of five the company operates – might not be quite the bucolic image of a family farm that shoppers envision as they pay sometimes twice as much for organic milk. But founders of the nation’s biggest private-label organic milk provider say that such large facilities are necessary to capture economies of scale that lower prices and spread the ecological benefits of organic farming practices.

“If we really want to change what we do in agriculture, we have to be able to work with all sizes of customers and make organic milk available to people throughout the country and not just at high-priced specialty stores,” said Mark Retzloff, Aurora’s president.

The Boulder-based company’s critics contend that Aurora’s practices are jeopardizing the livelihood of the very small-scale family farmers that started the organic dairy movement. They charge that Aurora’s large farm simply pays lip service to organic ideals in order to capitalize on the premium prices consumers are willing to pay for organic milk.

Among other things, the critics allege that Aurora’s farms house too many cows and are located in inhospitably arid climates that prevent cows from grazing properly.

“It’s a bastardized system,” said Mark Kastel of the Cornucopia Institute, a Wisconsin-based farm policy research group that has filed several complaints against Aurora with regulators. “Their marketing secret is taking all of the good will developed by hundreds of farmers and applying it to factory farming.”

Retzloff, who has a long history as an organic-food entrepreneur, countered that many of the statements of Aurora’s critics are “nasty and filled with falsehoods.”

This week, Cornucopia announced that two lawsuits seeking class-action status for consumers in 27 states were filed in Denver and St. Louis for allegedly misleading consumers by selling milk labeled as organic though the dairy doesn’t meet federal standards. Aurora officials responded that their organic certifications are valid and there’s no basis to the claims.

The vitriolic dispute in August resulted in Aurora agreeing to make major changes in its operations after the U.S. Department of Agriculture threatened to revoke its organic certification for violations including not allowing lactating cows daily access to pasture during the growing season.

As part of the agreement, Aurora agreed to cull the size of its Platte- ville herd to about 1,075 milking cows, down from 2,100 in August and 4,200 about 18 months ago. The dairy will also add 400 acres of pasture by razing three-quarters of the farm’s existing paddocks and buildings.

Even with the changes, Aurora remains at the heart of the contentious debate over what constitutes organic, as large companies, including Wal-Mart and General Mills, crowd into the profitable market.

Milk leads organic sector

Organic milk is one of the fastest-growing segments in the already fast-growing organic market. U.S. retail sales of organic dairy products totaled $2.14 billion in 2005, the most recent data available, up from 24 percent in 2004, according to the Organic Trade Association. JP Morgan predicts that the organic dairy sector will post sales of $3.5 billion by 2010.

Cows that produce milk sold as organic must be free of hormones and antibiotics and fed chemical-free organic feed. But federal rules are silent on how pastoral an existence the animals are supposed to have. They say nothing about how much time cows should spend in the fields as opposed to feedlots. The USDA requires only that the cows have access to pasture.

Aurora’s Platteville farm contains 1,075 milking cows on 500 acres. While Aurora doesn’t have a specific percentage for how much of its cows’ diet comes from grass instead of feedlot grain, its goal is to have pasture comprise at least 30 percent during the typical May through September pasture season, said Clark Driftmier, Aurora’s vice president of marketing. Aurora milks its cows two or three times a day.

By comparison, Jim Greenberg’s central Wisconsin dairy is considered large for a family- run farm with 500 cows on 1,000 acres of pasture. His cows receive 70 percent of their diet from grass during grazing season, which typically lasts from the first of May to the first of November. He milks his cows twice a day, saying three times a day would move them off the pasture too much.

Aurora produces the same amount of milk as 300 average Midwestern dairy farms, said Greenberg, who employs five family members and eight others.

Since Aurora started, “I’ve heard more people voice skepticism about organic milk and how well the standards are enforced,” he said. “They say if it’s going on at such a large scale, people lose confidence whether it’s really organic.”

For Aurora’s Retzloff, that criticism over scale goes to the heart of the controversy, and he says the company doesn’t get any credit for the benefits its size can bring. He points to Aurora’s efforts to recycle the farm’s plant and water waste, use wind power at all of its farms and offices, and offer bilingual classes, health benefits and subsidized housing for farm workers.

Organic veterans

Most of Aurora’s top executives aren’t newcomers to the organic food business. Retzloff co-founded pioneering Boulder natural-foods store Alfalfa’s in the 1970s, which was later purchased by Wild Oats. He went on to help start Horizon Organic Dairy in the early ’90s along with three other co-founders, including conventional dairy farm owner Marc Peperzak, and he helped turn around Rudi’s Organic Bakery.

Horizon revolutionized the organic dairy industry, selling organic yogurt, a variety of cheeses, milk and butter plastered with its “happy cow” mascot waving the organic flag. The Boulder- based company, which was later purchased by Dean Foods, quickly became the largest provider of organic dairy products in the country and the first company to successfully launch a national organic dairy brand.

Horizon also drew the ire of small farmers for its large-scale farming practices.

The supermarkets that Horizon shipped its milk to were constantly asking whether they could provide private-label milk. At the time, doing so would’ve been impossible – organic cows were so scarce that Horizon needed every ounce for its own brand.

But Retzloff and Peperzak saw an opportunity. As much of 70 percent of the conventional milk market was sold through generic store brands, while the private-label milk market hardly existed. At the same time, stores like Safeway, Whole Foods and Target were focusing on building their own private-label organic lines to make organic products more affordable.

So in 2003, Peperzak decided to start Aurora Organic as a dairy that would exclusively produce and package milk for supermarket customers, never using its own label.

Aurora was created to “focus solely on the red-headed stepchild” of private-label organic, said Driftmier, who also worked with Horizon.

Helped by $18.5 million in seed money from the investment arm of the Harvard University endowment fund, Peperzak underwent the yearlong transition process to convert his conventional dairy farm in Platte- ville to a certified organic dairy. Before the first carton of milk came off the line in 2004, the wait list of customers was far longer than the number of companies it could actually supply, Driftmier said.

“What Aurora’s done is studied the market quite well,” said William Wailes, head of animal sciences at Colorado State University. “Sometimes, the price needs to come down for people to buy more.”

Within the next three years, Aurora added another four dairy farms in Colorado and Texas and now supplies about 20 grocery stores and posts annual revenues above $100 million. As the company adds more and more cows, it has expanded into new products in recent months, including gallon-sized jugs of milk. Retzloff said the company plans to eventually move into the largely untapped market for restaurants, schools and other institutions, which purchase nearly half of the conventional milk produced. Big stores among clients

As a private-label supplier, Aurora Organic says it can’t discuss its clients. But among those publicly named are Wal-Mart, Target, Costco, Safeway and Wild Oats.

Spokespeople for Target and Safeway say they’ve received few if any customer complaints in the wake of the USDA’s action and remain confident in Aurora’s USDA certification.

“We are confident in our relationship with Aurora based on the fact the USDA upheld their organic status,” said Brie Heath, a spokeswoman for Target, which sells Aurora’s milk under its Archer Farms brand.

Aurora’s Driftmier said the dairy’s customers have been “supportive.” The only customer Aurora is losing is Wild Oats, following Whole Foods’ purchase of the natural foods market in August. Whole Foods is in the process of replacing Wild Oats’ private-label milk with Whole Foods’s 365 Everyday Value private-label brand, which comes from a cooperative of small family farms.

Aurora produces all of its own milk and collects, pasteurizes and packages it all at its Platte- ville site. That’s a change from Horizon, which purchases milk from smaller organic dairies, including Greenberg’s, to supplement its own production.

Family farms like Greenberg’s have been on the decline for the past 50 years, squeezed by giant farming operations, and the only way Greenberg and many others have been able to stay in business is by finding a niche like organic farming. While there’s enough demand for organic milk to keep everyone busy, they’re worried that large farms like Aurora might eventually lead to overproduction.

“If organics gets exploited, there will be no small family farmers left,” said Steve Pechacek, founder of milk and cheese provider Organic Choicewho formerly ran a 100-cow dairy farm in Wisconsin. “It will only be the large industrial farms.”[email protected] or 303-954-2514

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